Consumer Energy Alliance analyzes Low-Carbon Fuel Standard compliance scenarios for 11 northeast states

WASHINGTON – November 13, 2009   A regional Low-Carbon Fuel Standard (LCFS) imposed on 11 Northeast and Mid-Atlantic states would result in prohibitively high gasoline, diesel and home heating oil prices, and would likely be logistically impossible to meet under any of the compliance scenarios currently being considered. That’s the conclusion reached in a new analysis produced by Consumer Energy Alliance (CEA) and submitted this week to the Northeast States for Coordinated Air Use Management (NESCAUM).

“Our analysis shows that under each of the compliance scenarios contemplated by NESCAUM, the imposition of an LCFS on the Northeast will lead to substantially higher prices at the pump and restricted access to essential fuels such as gasoline, diesel and home heating oil – without doing a thing to reduce global greenhouse gas emissions,” said CEA vice president Michael Whatley, who participated in two public meetings hosted by NESCAUM in Newark, N.J. and Boston last month.

Created in the 1960s to advocate for the Clean Air Act, NESCAUM is currently working to develop a framework to encourage Northeast and Mid-Atlantic states to adopt model LCFS requirements, thus creating the nation’s first regional standard.  At its core, an LCFS seeks to reduce greenhouse gas (GHG) emissions by restricting the use of conventional fuels such as gasoline and diesel, while increasing the use of alternatives.

In analyzing potential methods for designing an LCFS, CEA considered the consequences of two compliance scenarios reportedly under consideration by the group: 1) forcing fuel producers to meet LCFS mandates by injecting enormous amounts of corn-based ethanol into fuel stocks, or 2) forcing them to purchase carbon credits for the right to remain in business.

Under the ethanol compliance scenario, CEA found that in order to meet a 10 percent emissions reduction target, ethanol would need to comprise a full 50 percent of the region’s fuel supply. To handle this E-50 ethanol, every single car in the 11-state region would need to become a “flex-fuel” vehicle, a significant feat considering that today less than one percent of vehicles on the road meet that standard.

Logistics aside, the plan would also cost some serious money:

In order to handle gasoline with an ethanol blend over 10%, gasoline storage tanks and pumps … will need to be replaced with special tanks and equipment … currently projected to cost between $50,000 and $200,000 per location.

Under the credit purchase scenario, fuel retailers would need to purchase credits from alternative energy producers to comply with an LCFS. However, given the relative lack of commercially available technology in this space at present, it’s not entirely clear how compliance could be met under this scenario — a fact that NESCAUM admits in its report (page 21):

While the outlook of these technologies is promising, the volumes that would be required in order to meet a 10 percent LCFS by 2020 greatly exceed the volumes that have been produced to date.

In formal comments submitted to NESCAUM following its LCFS meetings, CEA also analyzed policy alternatives that could achieve emissions reductions in ways that are cheaper and more efficient than an LCFS. Comparing these alternatives to current LCFS proposals, CEA concludes that an LCFS will raise fuel costs substantially higher than would be the case under new CAFE requirements or the implementation of Renewable Fuels Standards – and will achieve significantly lower emissions reductions.

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